Brian Lee: Okay, and…
Beth Eby: And we’ve done all of those.
Brian Lee: Yes. And given the…
Beth Eby: Pending final adjustments, but yes.
Brian Lee: Understood. Sorry, I cut you off there. So it sounds like even given the negative EBITDA outlook here that you updated the market on this morning, you still plan to be in compliance with all those covenants through year-end?
Beth Eby: That’s we need to get to the final. They’re always the backward looking and we’re fine in Q3 and we’re talking to the banks about waivers for the restatement and anything else we need.
Brian Lee: Okay, understood. Helpful. And then just shifting gears a little bit, I know there’s been a lot of focus around growth and inventory, supply chain type matters for you. I guess, I wanted to hone in on kind of the cost structure a bit. You did almost $100 million in EBITDA last year on 80,000 new customers at the midpoint this year. You’re talking about 75,000 customers or so. I know it’s off your original view entering the year, but relative to last year, it’s not that significantly lower. So — but EBITDA is clearly going to be significantly negative given the new update here. So I wanted to understand better, kind of, where you’re at in terms of thought process around the cost structure. It seems like you clearly had a higher cost structure coming into the year given a more optimistic view on volumes that hasn’t played out and you haven’t been able to pivot quick enough on costs to navigate.
But if you think about next year, I don’t know if you have a fully formed view, but if it’s flat, if it’s still modestly down, like what are you thinking in terms of how fast and how much you can do on the cost side of things? Because again, you did $100 million in EBITDA on 80,000 customers. Given where market trends are, I think it wouldn’t be that aggressive to assume next year is flat and not a growth year. So just kind of wondering what you think the cost structure needs to look like and what maybe targets there could be in terms of achieving some cost reduction?
Peter Faricy: Yes, thanks Brian. I’ll take that. So you’re right. I think this year if you took a look at our guidance, last year we grew revenue 54%, customer is 4%. We were cautious this year, if you recall, the very beginning of the year, our customer guidance was 20%. So we thought with the impact of California NEM, obviously that would slow things down. But we didn’t expect to be in a position where, you know, our revenue will be flattish year-over-year and customers will be down a little bit year-over-year. And so we weren’t prepared for that scenario. But this is the — in our announcement today, we’ve announced our second round of cost reductions, fixed cost reductions. And we talked about this on our last call, but the very first thing you attack are discretionary spending and you look for places to reduce waste.
That’s the formula that matters the most. You don’t want to take away things that matter to customers and matter to dealers, but you really want to take away things that are discretionary and things that, in this kind of down market, are prudent to reduce. But we’re not done yet. We’ll still continue to evaluate our fixed cost structure. Throughout Q4, I anticipate the possibility that we’ll eliminate even more fixed costs during this quarter. And the key thing for us is to really emerge as a stronger, more resilient company for 2020. The point you’re making, I think we strongly agree with. This kind of volatility, you don’t usually see this in consumer markets, but it is what it is. So we have to build a company that’s resilient and can be prepared for a minus 10 or minus 20, a flat, or a plus 10 or a plus 20.
And that’s our goal with these cost reductions is to put ourselves in a position where we’re able to work through the market regardless of how volatile it is for next year. We do have to recognize from a world standpoint there are a lot of disruptions happening globally and it is hard to say how those will have an impact on both consumer confidence and interest rates. So it’s prudent right now. You know, you have to be thoughtful about where you spend and how you spend and that’s exactly what we plan to do. So, you know, the focus we talked about in the last call, deliver results, manage cash and liquidity, continue to lower our costs, put ourselves in a position where we have a stronger balance sheet, stronger company. That’s exactly what we plan to do throughout the remainder of Q4 and be ready for, I hope, a great recovery year in 2024.
Brian Lee: That’s helpful, Peter. So I guess if I hear you correctly, there’s a lot of fixed charge focus. So if we’re trying to track your progress over the next few quarters and into 2024, is it fair to assume we’d see it more in your gross margins than in your OpEx line?
Peter Faricy: Yes, I think you will. And I think the other lever we have is, one of the key ways to be successful when demand is more volatile is trying to make as many of your cost variables possible. You know, so our goal would be to reduce fixed costs that are truly fixed, and then make as many of our fixed costs variable costs, so that they really only get incurred if the business is there and the business happens. And that’s the work that we’re doing right now behind the scenes. And I expect that we’re going to be in a position where, again, we’re a much stronger and more resilient company by the time we end this calendar year.
Brian Lee: All right. I appreciate the call. Thanks, guys.
Operator: Thank you. 1 moment for our next question. Our next question comes from the line of Ben Kallo from Baird.
Ben Kallo: Hey, good morning. Thanks for taking my question. Peter, could you just update us on progress with new panel manufacturers, any relationships there? And then as you open up to kind of a agnostic technology platform, both panel side and the battery side, how do you balance that with the SunPower brands, which is a great brand value?
Peter Faricy: Yes, great question, Ben. So first I’ll back up. I think many of you know we’ve had a partnership with Maxeon since the spinoff. We continue to work with Maxeon. We’re in discussions with them. I think those discussions have trended positive and we’re cautiously optimistic that we’ll work out an agreement for both parties that I think is advantageous for both companies. So on the Maxeon side, that’s where we stand. Interestingly enough, in Q3, we hit a milestone that we’ve never hit before, which is actually we sold more non- Maxeon panels than we sold Maxeon panels. That’s not purposeful. It really is about what consumers want and what dealers want. And so I think that’s a signal that the mainstream segment and more leasing is probably going to put more pressure to have panels that are high quality, but also really affordable.
